The Ratings agency Fitch has joined the IMF in putting pressure on the EU to forge a more comprehenisve deal for the Eurozone debt crisis by downgrading its ratings for Greece.
The agency moved Greece from BB+ to B+, which means going from specultative grade to highly speculative grade.
In a note Fitch said 'In the absence of a fully funded and credible EU-IMF programme, the rating would likely fall into the 'CCC' category indicating that a Greek sovereign debt default was highly likely.'
Greek ten year bond yields went as high as 16.6% today, while the yield on two yearbonds was 24.8%
Earlier this week the head of the euro group of finance ministers, Jean Claude Juncker, indicated his support for a so called 'soft restructuring' or voluntary extension of the terms of loans made by bondholders to Greece, as a possible alternative to giving Greece an additonal loan package from the EU and IMF.
However Fitch said it would regard any change to the loan terms as a default, and said it would have negative implications for Ireland and Portugal.
'An extension of the maturity of existing bonds would be considered by Fitch to be a default event and Greece and its obligations would be rated accordingly,' Fitch said.
'If contrary to Fitch's expectations, private sector 'burden sharing' as a condition for new money extends beyond exhortation and is coercive, the credibility of policy commitments regarding the European Stability Mechanism and EU-IMF programmes for Ireland ('BBB+'/Negative) and Portugal ('BBB-'/RWN), as well as Greece, would be severely diminished and in Fitch's opinion would adversely impact financial stability across the euro area,' Fitch said.
Norway suspends payment of Greek grant
Norway has suspended the payment of a $42m grant to Greece because Athens did not fulfill commitments and may have broken rules related to the aid, the Norwegian foreign ministry has said.
Norway, which is not a member of the European Union, said the suspended grant was not related to the €110 billion euro bailout of Greece by the EU and the International Monetary Fund.
'The donors cannot accept (a) breach of the rules and have asked the Greek authorities to sort out these issues and to document how the funds have been spent,' the Foreign Ministry said in a statement. It did not elaborate on how rules may have been breached.
Norway said it had already paid out 13 million Norwegian crowns to Greece. The grant is part of Norway's contributions to EU states under the European Economic Area (EEA) agreement, a free trade pact; the aid is given to reduce social economic inequalities in central and southern Europe.
EEA projects in Greece include support for the environment, sustainable development and cultural heritage projects, schemes to improve the water supply and care centres for children.
